Watters v. Wachovia Bank, N.A.

The U.S. Supreme Court has upheld the OCC's regulation (12 C.F.R. 7.4006) preempting the applicability of state mortgage lending law to operating subsidiaries of national banks.

Wachovia Mortgage Corporation is a North Carolina chartered entity licensed by the OCC as an operating subsidiary of Wachovia Bank, N.A. It does business in Michigan and in other states. Michigan requires bank subsidiaries to register with the state's Office of Insurance and Financial Services (OIFS), and to submit to state supervision. When Wachovia Mortgage became a wholly owned operating subsidiary of Wachovia Bank, it surrendered its Michigan registration. Watters, the OIFS Commissioner, informed Wachovia Mortgage it could no longer operate in Michigan. Wachovia Bank sued for relief based on the National Bank Act and on OCC regulations that preempt state mortgage lending laws' applicability to a national bank's operating subsidiary.

Watters argued that the OCC exceeded its authority in issuing the preemptive regulations, and on other grounds. Watters' arguments were rejected by the Federal District Court, and by the U.S. Court of Appeals for the Sixth Circuit. On April 17, 2007, the U.S. Supreme Court affirmed the decisions of the lower courts.